CSE Global - UOB Kay Hian 2020-02-28: 4Q19 Slightly Ahead Of Expectations; Strong Order Backlog To Drive Growth

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CSE Global - 4Q19 Slightly Ahead Of Expectations; Strong Order Backlog To Drive Growth

  • CSE Global’s 4Q19 core net profit of S$7.8m (+54%) came in slightly ahead of expectations, with full-year performance forming 105% of our full-year estimate. Earnings were driven by strong revenue growth of 21.0% y-o-y in 2019 with broad-based growth across all regions.
  • Order intake soared 52.1% y-o-y, setting up for a strong 2020. We raise our 2020 and 2021 net profit by 4.1% and 3.6% respectively.
  • Maintain BUY with a higher PE-based target price of S$0.72, up from S$0.70.


Results slightly ahead of expectations.

  • CSE Global (SGX:544)’s core net profit (excluding forex) of S$7.8m (+54% y-o-y) in 4Q19 came in at a small beat, with full-year core net profit of S$23.1m (+22%) forming 105% of our full-year estimates.

Top-line growth across all regions and segments.

  • Earnings were supported by a strong revenue growth of 21% y-o-y in 2019. Revenue for O&G segment grew 61.7% y-o-y and 18.7% y-o-y in 4Q19 and 2019 respectively, driven by higher time and material revenue as well contribution from newly-acquired Volta.
  • Further, the O&G segment also saw higher margins due to improvement in sales mix, with EBIT for the segment growing 33.4% y-o-y in 2019. The Asia Pacific region recorded a 28.8% y-o-y growth in 2019 revenues due to higher recognition of revenues for projects in the infrastructure and mining sectors in Singapore and Australia.
  • We note that the radio communication business in Australia surged 38% y-o-y to S$64.8m y-o-y in 2019 which we understand was driven by its acquisition of RCS Telecommunications in 1H19.

Solid orderbook.

  • For 4Q19, order intake soared 52.1% y-o-y at S$156.1m (oil & gas: S$189.8m, infrastructure: S$24.2m, mining: S$16.0m), bolstered by the two major O&G greenfield projects worth S$103.7m secured in Oct 19, newly-acquired Volta’s orderbook and higher growth in flow orders.
  • Factoring in the higher order intake this quarter, the group ended the year with an outstanding order of S$307.3m (+69.8% y-o-y).


Growth in 2020 driven by strong order backlog and contribution from accretive acquisition.

  • We believe the year-end orderbook backlog backed by its latest greenfield project wins as well as the full-year contribution from Volta sets CSE Global up for a strong 2020. The group is anticipating a steady flow of orders from its existing customer base and is also pursuing sizeable contracts from Singapore infrastructure government projects as well as in the O&G space.
  • Further, management re-iterated that it is continuously on the lookout for value accretive and strategic acquisitions to grow the business. Overall, management expects a better performance in 2020.

Attractive dividend yield at 5.0%.

  • CSE Global has proposed a final dividend of 1.5 S cents per share, bringing total dividend to 2.75 S cents per share (unchanged from 2018).
  • CSE Global has adopted an absolute DPS payout of 2.75 S cents/ share since 2014 and we are expecting the same level for 2020, translating into a generous dividend yield of 5.0%.


  • We raise 2020 and 2021 net profit estimates up by 4.1% and 3.6% as we factor in a slightly higher orderbook. We also introduce our 2022 net profit forecast of S$31m.
  • Risks include lower-than-expected project wins and weak oil prices.



  • Large greenfield O&G project wins.
  • Large greenfield infrastructure project wins.
  • Accretive acquisitions.

Joohijit Kaur UOB Kay Hian Research | John Cheong UOB Kay Hian | https://research.uobkayhian.com/ 2020-02-28
SGX Stock Analyst Report BUY MAINTAIN BUY 0.72 UP 0.700